Are 3 Year Wireless Contracts Set to Disappear in Canada?

Canada is a special place. Why? Because when it comes to subsidies on the latest smartphones, our wireless contracts are three years compared to just two in the USA and other countries around the world.

With the CRTC recently announcing the results of their wireless code consultation, the results showed the top 100 ‘liked’ comment was related to 36 month contracts:

36 month contract

Canadian journalist Peter Nowak writes wireless carriers have long argued three year contracts are necessary here due to our smaller market, but the reality is Canada’s has the second highest average revenue per user (ARPU) in the world (via chetansharma.com):

canada arpu

If a smaller market such as Australia is able to get by with two year contracts, why can’t Canada?

Nowak argues the three year contract is pretty much dead, as carriers will make adjustments to two year contracts before any regulations kick in:

With further public hearings on the upcoming wireless rules set for February, it’s a safe bet that three-year contracts are now an endangered species. The carriers, as they always do when faced with the likelihood of new regulation, will soon make a big dog-and-pony show about “listening to customers” and voluntarily drop down to two-year commitments ahead of any rules being instituted. The pool is officially open on which will be the first to do it, and we’ll know it’s official and symbolic when it’s applied to the iPhone.

Of course, voluntary action is no substitute for rules. Three-year contracts may be going away, but they’ll only stay away if they’re prevented from coming back.

What do you think? Will the CRTC be able to make the three year contract disappear? Or will carriers voluntarily do first?

Founder and Editor-in-Chief of iPhoneinCanada.ca. Follow me on Twitter, and @iPhoneinCanada, and on Google+.

  • Arcsvibe

    They need to leave like yesterday lol!

  • Husein S.

    Sure, they’ll disappear but the Big 3 will get their money some other way. They’ll either offer the phones at a higher price or increase plans or add crazy HUP fees. We’re not going to win, but hey, it’s worth a shot.

  • MikeJenkinson

    This is absolutely a case of consumers needing to be careful what they wish for…

    So instead of, say, a $199 iPhone on a 3-year contract, we’ll be offered a $399 iPhone on a 2-year contract and then everyone will bitch and moan about how the telcos screwed us by jacking up the price of our handsets.

    If you don’t want a three-year contract, go to the Apple Store, buy an iPhone for full price, and then take it to any carrier and sign up on a plan that you can cancel and change whenever you want.

  • Brian

    Yes, the 3 year contract is a symptom, not a cause. The cause is that there is no competition between carriers. They collude to price fix and can basically do whatever they want because there are only 3 viable alternatives all working in cahoots. Wind/Mobilicity are only viable for people that never leave small, localized calling zones. Allowing real competition will solve the 3 year contract issue, as well as many others, such as charging way too much for data/roaming/etc. If they do away with the 3 year contract they will just find another way to extract the same amount of money out of each person.

    The last two phones I’ve bought have been unlocked and unsubsidized, but with the rates that are charged for data plans, it still is prohibitively expensive, in terms of opportunity cost, to not lock into a new 3 year contract in order to get that $500 subsidy.

  • pegger1

    You don’t need to go to Apple to pay full price. But even a lot of plans require a 3 yr commitment regardless if you get a phone subsidized.

  • Ojamali

    you mean the Big 3 will get “our” money some other way.

    I’m okay with a 2 yr contract if they increase he monthly economic inducement to ensue the subsidy still stays the same @ $ 500. So instead of distributing the subsidy over 36 month spread it over 24 months instead. Sounds fair to me.

  • roadcarver

    Carriers should also allow for phones to be unlocked while under contract. Give the option for the consumer to use the carrier’s international plans or the local service provider’s plans.

  • wahgee

    I don’t mind a higher price for a shorter term. Unlocked a actually better. You can get better price plans. They don’t tell you, but you can negotiate.

  • FragilityG4

    Aren’t iPhones $50 cheaper in Canada than the states because of the three year contract? If it is wouldn’t the handset only go up by that same $50 … I guess the Dumb Three will try and find someway around that …

    I’m sure you won’t be able to keep your retention plan too ……

  • gweed123

    Ban 3 year contracts and drop the CRTC rules limiting outside companies from launching cell networks in Canada. The moment US companies start to bring their services into Canada, the 3 Amigos (Rogers, Bell, Telus) will start to actually listen to consumers.

    AT&T and Verizon manage to sell the iPhone for the same discounted price as the 3 Amigos do, but they only have 2 year plans, and lower monthly fees. Either Canadian carriers are incredibly inefficient at delivering their services, or they’re making huge profits. My bet is on the latter.

  • gweed123

    Side note: I just hope when the CRTC does rule on banning 3 year contracts, that they retroactively apply it to existing contracts as well.

  • f14fanatic

    Rogers will find a way to always scr**w the little guy.

  • hub2

    “So instead of, say, a $199 iPhone on a 3-year contract, we’ll be offered
    a $399 iPhone on a 2-year contract and then everyone will bitch and
    moan about how the telcos screwed us by jacking up the price of our
    handsets.”

    And THAT is probably why it’ll still need actual CRTC regulation to protect consumers.

    The iPhone was $159 on 3 year when I got it. I would’ve gladly paid the extra $40 making it $199 for 2 year contract like the rest of the countries in the world that don’t have gutless regulators (or have real competition). But even for carriers that offered it, for 2 years you had to pay something like $599, 1 year for $649, and contract-free for $699. $400 difference for one year? That’s highway robbery. If their “need subsidy to recoup cost of phone” excuse held any water, it would be pro-rated to roughly $199 3yr, $350 2yr, $550 1yr, $699 contract-free.

  • hub2

    Technically most carriers do allow under-contract unlocks, for $50-ish and some conditions (all bills paid, at least X months into contract, etc). Bell was a holdout but IIRC they’re coming on board soon.

  • Enougharguing

    Dude you’re arguing stupidity. The US and many other countries are either smaller in size, have millions more users, have garbage networks or give little to no subsidy. You can’t compare the us and what they are doing to Canada, they are a smaller country with 10x more civilians living there. AT&T has almost 3x more clients then Canada has people. How do you expect the telecom companies to be like them? Do you know how much an LTE tower cost? Do you know how much money it takes to cover 98% or this county’s populated areas? You probably would fall out of your chair if you knew. It takes an average of $25 per client for a network provider (bell telus Rogers) to break even. Does it make sense for a business to charge 2-3x their cost prices to stay profitable? Most companies charge 3-10x what they paid to make profit. Have you seen the price of gas? My point is simple. Create your own network. Invest the 6-8 billions it takes to start a cellphone company in Canada. Then buy millions of overpriced phones and turn around and sell it unlimited everything stupid cheap. Btw those small “unlimited with no network and garbage phones and service companies” borrow the networks already created. Until you start your own cell phone company shut the hell up already!

  • gweed123

    What about Australia? 10 million fewer people than Canada, large areas of rural land with relatively concentrated population bands along the coasts. In fact, Canada has a higher population density per sq km than Australia does (3.4 vs 2.8).

    iPhone 5 16GB with Vodafone Australia: $6/month for the phone ($144 over the 2 year plan), $60/month for the plan over a 2 year contract (1GB of data, unlimited texting, unlimited calls to other vodafone customers).

    If I could get that kind of a deal in Canada, I would be very happy.

    PS: No need to be rude about it. For someone with the handle “enougharguing”, you sure sound pretty argumentative.

  • Enougharguing

    Check the big 3 websites you’ll see the new plans, if you aren’t happy then you probably will never be

  • gweed123

    I’m on one of the new plans from Rogers. I don’t mind the plan itself that much (although I still think it’s overpriced for what I’m actually getting), it’s the contract length that I don’t like.

  • Morty

    I agree!

    Look at all the plans and how they all seem the same from the big 3, coincidence ?
    I think not !

  • Konstantine Neikours

    I usually sign up for 3 year contract but if I want to upgrade my device, Fido usually is ok with the upgrade with no additional fees even if I’m only 2 years into my contract. I’ve been with them for 8 years now and they treat loyal customers good. (i’m not affiliated with Fido, just one happy customer)

  • gtarhilll

    I have an unlocked 4S from Apple and none of Rogers’ decent plans were available without a 2 or 3 year commitment. I actually feel like a bit of a dolt for buying the unlocked phone, when I had to get into a contract anyway.

  • Jon

    7$ more for 1 yr extra contract length. You still fail to explain it. Quit being devil’s advocate.

  • Hygr

    “have garbage network”, and our big 3 don’t?

  • KC

    When they ban 3 years contract, they’ll give you 2 years contract and charge you more for the phone price….this is what they’re going to do…just my educated guess…^^

  • marv

    3 year contracts should have been abolished long ago. I will always be willing to pay more for my phone for a shorter obligation period. The only reason I sign up for 3 year terms is that its thr only way to get a decent deal from telus. I hope the crtc does away with them and allows entrants from the outside to increase competition and promote fair price s.

  • Tom

    We used to have 2 year contracts. U.S. also are on 2 year contracts. No way Canadian Carriers will ever go back to 2 year contracts.

  • Ramin

    So far from my experience with iPhone shows it won’t last more than two years with my everyday use. 3 years is too long and unfair. I would favor either two years or having an option to choose between two and three years.

  • techromancer

    Dude, you are a telco shill. That whole argument about Canada being so vast and hard to cover is complete BS – Canadian networks don’t even try to cover all of Canada’s vastness, but only it’s populated centres, which are just as densely populated as anywhere in the US.

    Likewise your argument about how expensive it is to set up a network. Sure, expensive, but this very article shows Canada is only behind Japan in ARPU (average revenue per user). This is more than other countries with much higher valued currency. You make it sound as if the Big 3 are barely breaking even, or doing some kind of public service, as opposed to making profits far above their counterparts in other countries.

    I know you’re paid for it, but get off the forums with your bogus, industry-promoted rationale, shill.

  • Nick

    What Canada needs is 2years with the benefits from the old 3 year plans (to compete nationally). However it seems telcos will do everything they can to get around being fair and competitive. It is hard to give up gouging when they have been doing it for so long.